This is an important contribution to the globalization versus the environment debate and an enlightening analysis of China's ecological challenge. Through a merger of methodological rigor and thorough research, Ka Zeng and Joshua Eastin make a convincing case that, despite the claims of globalization pessimists, China's integration into the global economy has not undermined the stringency of its environmental regulation. Rather, foreign firms and export markets have contributed to China's on-going battle against industrial pollution. Scholars of global environmental politics and Chinese studies, as well as anyone interested in the broader impacts of globalization, will find that this work has much to offer.
In theoretical terms, Greening China: The Benefits of Trade and Foreign Direct Investment addresses the assertions of globalization critics that economic integration contributes to a race-to-the-bottom in environmental standards. According to this theory, in a world of mobile capital, governments competing to lure new investment are compelled to relax environmental regulation. Pollution-intensive firms respond to this opportunity by shifting production to lower standard jurisdictions, thereby turning developing countries into pollution havens.
The authors contrast this dark view of globalization with the more optimistic “trading/investing up” theory. From this perspective, global economic integration unleashes a variety of forces that enhance environmental regulation in a developing country such as China. Developing country exporters are subject to pressure from customers in overseas markets for greater attention to pollution control. Trade and investment also facilitate the transfer of technology and environmental management practices that improve the environmental performance of firms in China. The question for Zeng and Easton is, in the case of China, which theory better captures empirical reality?
Their answer is that economic integration has clearly had a constructive impact on China's environmental regulation and the behavior of firms. First, economic openness has enhanced the environmental management practices of companies in China, both foreign and domestic. While acknowledging that it is not hard to find anecdotal evidence of a multinational polluting the environment, Zeng and Eastin find these cases to be more the exception than the rule. Even in the absence of a strong enforcement threat, companies in China have engaged in self-regulation either to assure access to overseas export markets or to protect their reputation in the Chinese market. In particular, Chinese firms that export to countries with stringent environmental regulation (e.g. Western Europe) show a greater willingness to self-regulate.
Second, rather than inducing government officials to weaken standards, integration with the global economy has strengthened the environmental performance of provinces. In part, the absence of the race-to-the-bottom phenomenon is explained by the absence of demand on the part of firms for lax regulation. Since companies face a variety of pressures to improve their pollution control and, in the case of foreign firms, possess the capacity to comply with China's regulation policies, they do not apply pressure on local government officials to weaken environmental standards. Moreover, technological spillovers and innovation spurred by global competition also undermine pressure for deregulation. Finally, in similar fashion to firms, provincial leaders are sensitive to reputation concerns and seek to avoid the image costs associated with their provinces being perceived as heavily polluted.
Zeng and Eastin base their argument on a wide array of data and employ a variety of methods including statistical analysis, a survey of business executives, and a case study. Indeed, one of the more impressive aspects of this work is the authors' methodological variety. After the initial chapters introduce the relevant literature, lay out the book's argument, and offer a useful overview of China's environmental challenge and regulatory regime, Chapters 4–7 present the empirical evidence. In Chapter 4, the authors gather statistical data to demonstrate that the stringency of a province's environmental regulation does not negatively influence its ability to attract foreign investment. They also present a second set of models that show economic openness and foreign investment are both associated with less pollution (e.g. sulfur dioxide emissions). Chapter 5 takes the argument a step further and, again through statistical analysis, demonstrates that provinces that receive investment from or send exports to countries with more rigorous environmental standards are likely to have a greater number of firms engage in voluntary self-regulation.
The final two empirical chapters bolster the statistical analysis by shifting the focus away from the province and toward the firm. Chapter 6 presents the results of a survey of senior-level executives in fifty firms operating in China. The authors find that executives in companies that sell to multinational customers or that export to environmentally stringent markets report higher levels of environmental awareness, ISO adoption, environmental management, and compliance with pollution control laws.
Chapter 7 presents a detailed case study involving Asia Pulp and Paper (APP), an Indonesian company that is one of the world's largest paper manufacturers and that has garnered a great deal of attention from environmental activists in China for its alleged illegal logging practices. Drawing on interviews with company representatives, government officials, and environmental NGOs, Zeng and Eastin trace the changes in APP's environmental management in its China operations, arguing that over time it has genuinely moved in a more environmentally-friendly direction. They attribute APP's turnaround to the impact of pressure from export markets and provide several examples of multinational companies (e.g. Wal-Mart) that stopped purchasing APP products due to environmental concerns. In the end the case reads less like a victory for market forces than the triumph of Chinese activists and international NGOs, who for years struggled to shine the media spotlight on APP's questionable practices, but it is nonetheless a detailed and fascinating story.
While as a whole, Zeng and Eastin make a strong case, there are a few points with which one might quibble. For instance, one can raise questions about the authors' use of the province as the unit of analysis. Their stated reason for this sub-national focus is that local governments in China have a great deal of autonomy from Beijing in the environmental protection realm and there is a wide variety of outcomes across provinces in terms of key independent variables (e.g. investment and export levels) as well as dependent variables (e.g. environmental performance). What the authors do not expound upon, however, is the role of the provincial government in either implementing environmental regulation or attracting foreign investment. More discussion of the specific part played by provincial governments would have enhanced their case. The authors' own discussion of the environmental regulatory regime emphasizes the role of lower-level governments such as counties in enforcing environmental standards (pp. 46–47). Given that Chinese provinces can be as large as nations—there are almost two-dozen Chinese provinces with a population larger than Australia's—one wonders if much of the action is taking place below the provincial level. In other words, even if the general trend across provinces is toward more stringent environmental regulation, is it possible that there are pockets of pollution havens within provinces? This is a question that the authors cannot answer but that is relevant given their strong rejection of the pollution haven and race-to-the-bottom argument.
Also, as can be the case when scholars attempt to apply rigorous quantitative methods in a setting that is data-scarce, the authors occasionally are forced to employ problematic proxy measures of variables. For instance, in Chapter 4 the authors perform econometric analysis to assess the “pollution haven” hypothesis that foreign investment is drawn to provinces with weak environmental standards. To measure the environmental stringency of a province, the authors draw on data from the China Statistical Yearbook for the annual pollution levy paid per firm for a variety of pollutants such as wastewater, solid waste, etc. While it is certainly plausible that provinces with more stringent regulatory systems will impose greater fines on polluting firms, the resulting rankings are puzzling (Figure 4.1). Gansu and Guangxi, two of China's poorer provinces, appear consistently among the most environmentally stringent, which runs against the conventional wisdom that wealthier jurisdictions tend to have stronger environmental regulation.
Although these critiques may cast modest doubt on the findings, they should not be taken too far. To the authors' credit, they are thorough in employing alternative measures, performing robustness checks, and explicitly acknowledging the potential limitations of their approach and data. Overall, Greening China is a work of high quality that amasses an impressive array of evidence and offers insightful, intricate analysis. Zeng and Eastin have given critics of globalization much to think about.
